Fuelling the price decline
UK multi-utility and domestic services company Centrica reported results today, and there's an interesting fact that came out in the conference call, according to my boss, who is an oil and gas analyst. Centrica's main business is residential gas, and they lost an awful lot of customers last year (over a million). However, they've also got 1.4m pre-select telephony customers, which makes them a significant player in voice. On the conference call, management apparently alluded to a customer win-back strategy whereby customers who fit the desired profile are offered free evening and weekend calls for coming back to Centrica. Average annual household expenditure on gas in the UK is £340, but I am told that Centrica probably has to pay something like £125 of that gross figure to the network owner Transco. So maybe a net figure might be £215. BT's latest reported annualized revenue per household (net of outpayments to mobile operators) was £259. These numbers probably aren't strictly comparable, but we could argue that Centrica gives away the "more valuable" commodity service to retain control of its dominance in the "less valuable". What does BT give away?